LSO Spot Audits and Practice Reviews: What Has Changed

By: Keith Hill Jr.

Ontario law firms are seeing meaningful changes in how the LSO Spot Audit and Practice Review programs are being administered. According to the Law Society of Ontario, these changes reflect a broader shift toward risk-based, data-informed regulation. As a result, oversight is becoming more focused on measurable indicators and areas where issues are more likely to arise, rather than applying the same level of review across the board.

The Law Society is moving toward a compliance framework that emphasizes early detection, proportional oversight, and proactive support. Lower-risk firms may be selected for remote Check-Up reviews, while higher-risk firms or those with prior deficiencies are more likely to undergo full onsite audits.

New sole practitioners are no longer automatically audited in their first year. Instead, they are required to complete the Foundations for a Law Practice course, with audits triggered by risk indicators rather than timing alone.

As firms enter the new year and complete year-end housekeeping, this is an ideal time to consider these recent changes and how this more targeted, data-driven approach is shaping the administration of LSO spot audits, particularly as it relates to how firms manage their practice bookkeeping and trust accounting.

Changes in the Spot Audit Program

The Law Society now uses up to 10 years of historical data to help identify practices more likely to experience books-and-records deficiencies.

Indicators may include:

• Sole practitioners handling real estate matters

• Practices involving estates or Powers of Attorney

• Trust accounts with overdrafts or outstanding deposits

• Client trust ledgers that have remained unchanged for extended periods

  
  

While the audit cycle remains risk-based, selection is now more data-driven and targeted than in the past.

A More Streamlined Audit Process

The audit process itself has been refined to improve efficiency and focus:

• Scope now targets the most common and higher-impact deficiencies

• Overlapping procedures between spot audits and practice reviews have been reduced

• Audit steps have been consolidated to limit unnecessary administrative burden

This allows greater attention to be placed on material compliance issues rather than lower-risk items.

Audit Format: Remote, Onsite, or Hybrid

Spot audits may now be conducted remotely, onsite, or through a hybrid approach. Currently, approximately 25% of audits are conducted onsite. Format selection is based on practical considerations, such as tight timelines, difficulty obtaining records electronically, or accommodation requirements, rather than preference.

The Check-Up Program (for Lower-Risk Firms)

For firms assessed as lower risk, the Law Society has introduced a condensed audit model known as the Check-Up Program. These reviews:

• Are conducted remotely

• Focus primarily on trust accounts

• Are based on prior compliance history and regulatory profile

• May be escalated to a full audit if significant deficiencies are identified

  
  

This approach allows oversight to continue while minimizing disruption for well-managed firms.

Common Risk Areas Identified During Audits

Law firms should regularly review their processes around:

1. Monthly trust reconciliations

2. Commingling of client and firm funds

3. Timely deposit of client retainers

4. Proper authorization of trust transfers

5. Complete and up-to-date client trust ledgers

   
   

Repeated or uncorrected deficiencies, particularly those involving trust accounts, can lead to increased scrutiny.

Inclusion of Paralegals in the Spot Audit Program

Historically, spot audits applied only to lawyers. As of 2025, paralegals who handle client money are also subject to the Spot Audit Program, creating more consistent oversight across both professions.

Changes to the Practice Review Program

The Law Society has expanded the use of random practice reviews, which are not triggered by complaints but selected as part of its proactive quality-assurance process. These reviews have proven more effective at identifying competence issues than re-entry reviews, which have now been eliminated.

Selection is informed by risk indicators such as:

• Firm size, particularly sole practitioners and small firms

• Career stages where risk increases, specifically around the 10-year mark and again after 40 years of practice.

• Practice areas with higher complaint or insurance claim activity (for example, real estate and civil litigation)

  
  

This allows regulatory resources to be directed where issues are statistically more likely to arise.

Clearer Scope and Reporting

The Practice Review Program has also been streamlined to improve usability:

• The scope has been streamlined, with 72 detailed questions now grouped into 19 broader categories.

• Reports are shorter, clearer, and easier to follow

• Each report includes links to practical guidance and support resources

• Recommendations are more focused and easier to implement

Final Thoughts

The Spot Audit and Practice Review programs remain core quality-assurance tools for the Law Society. While they serve different purposes, both are intended to support professional competence, protect the public, and identify issues early so they can be addressed before escalating into more serious non-compliance.

The Law Society has consistently emphasized that these processes are not intended to “catch” licensees. When approached properly, they can help strengthen internal systems, improve trust accounting controls, and reinforce good practice management.

Rather than applying a one-size-fits-all model, the modernization of the LSO’s Spot Audit and Practice Review programs reflects a move toward oversight focused on where issues are most likely to arise. These updates are in response to significant shifts in the legal profession, including recent growth in the number of lawyers, increased reliance on technology, and the normalization of remote work, all of which have added new complexity to practice management.

Nonetheless, firms that embed strong bookkeeping, trust accounting, and internal controls into their day-to-day operations are better positioned to experience streamlined, less frequent audits and reviews.

Keith Hill Jr. is the President of Bookkeeping Matters Inc. (BMI), providers of legal bookkeeping and compliance support to law firms across Ontario and beyond. With more than 15 years of experience in legal accounting and as a former Legal Accounting professor, Keith also leads BMI’s training and education initiatives, helping law firms and bookkeepers understand trust and matter-centric accounting and audit readiness.

For assistance with legal bookkeeping support or training, contact Bookkeeping Matters Inc. at info@bookkeepingmatters.ca, 1-800-893-2820, or visit www.bookkeepingmatters.ca.

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